Category Archives: Mike Shatzkin

The future of the book industry got a little murkier this week. The Department of Justice, no less, thickened the soup with its announced intent to go after five of the “Big Six” publishers — plus Apple — on charges of collusion. The alleged nefariousness dates back to the wholesale versus agency controversy at Amazon.

Amazon was setting e-book prices lower than the big publishers desired. The pubs were afraid consumers would get used to lower prices, thus cutting into their margins. Also, there was major concern about undercutting a big cash cow for traditional publishing: hardcover frontlist titles. And, of course, they all worried about the future of brick-and-mortar stores as Amazon gobbled up more of the distribution pie.

So Steve Jobs comes along (allegedly) with a plan to take major e-book business away from Amazon. With the iPad just getting fired up, Jobs (allegedly) went to the Big Six and proposed going into an e-book agency model agreement with them (Random House didn’t join the circle then, so is not part of the DOJ lawsuit). In return, the publishers would agree to keep their books off Amazon if it sold them at a lower price. In effect the five big publishers, as one, told Amazon You give us the agency model or you don’t get our books.

The players, IOW, were jockeying for position with the future in mind. This is what big business does. It’s understandable and even desirable in a free market economy so long as the businesses are not running afoul of anti-trust laws.

Amazon, not happy with being forced into agency, decided to take on the publishing industry directly by mimicking it. So they went out and hired industry veteran Larry Kirshbaum to head up the effort. Amazon subsequently made some big name signings – Deepak Chopra and Barry Eisler, for example.

More jockeying.

And now comes a dark cloud dumping rain — the United States Gummint. The track is suddenly soaked and the mud is kicking up all over everybody.

Who is going to be the best mudder? Who is going to be left behind?

That remains to be seen. But right now it looks like agency pricing will be escorted off the track. If publishers are forced back into wholesale, Amazon will be sitting even prettier than it is now, prices will once again trend downward, and publishers’ margins will shrink. There will be renewed howls of “predatory pricing,” but the DOJ well knows that’s a much harder case to make. So Amazon goes back to selling at loss-leader prices which, in turn, will trickle down to brick-and-mortar stores where margins are razor thin anyway. More stores will probably close. Your local Barnes & Noble, for instance. There is a whole interlocking spiral here that is beyond the scope of this post.

My main interest is in what this all means for writers. For the last couple of years the self-publishing boom has been a net-gain for writers, especially those with a track record. And a backlist. But even new writers who haven’t been able to get inside the gates of the Forbidden City are seeing real money as independents.

But in gazing at the horizon in light of the DOJ’s action, some are saying that things don’t look so rosy. Here is what Mike Shatzkin, the Insightful One, has to say:

Over time, the biggest losers here will be the authors. The independent authors will feel the pain first. Agency pricing creates a zone of pricing they can occupy without much competition from branded merchandise. When the known authors are only available at $9.99 and up, the fledgling at $0.99-$2.99 looks very attractive and worth a try. Ending agency will have the “desired” effect of bringing all ebook prices down. As the big book prices are reduced, the ability of the unknowns to use price as a discovery tool will diminish as well. In the short run, it will be the independent authors who will pay the biggest price of all. But, in the long run, all authors will just get less. They will join the legion of suppliers beholden to a retailer whose mission is to deliver the lowest possible price to the consumer.

I am going to take issue with Mr. Shatzkin on his characterization of writers as the “biggest losers” in all this. Not so. This is simply another development in a long and ever changing contest. Writers who produce, consistently and well, will always have a shot at the rewards of a race well run.

We didn’t create the Big Six or Amazon. But we will use them just like they use us. We will make strategic decisions, as they do. It’s called doing business,and writers are better positioned than ever to do it in creative ways.

So get on your horse, writer. Learn to ride in the mud. Don’t trust your fate to anybody else. You are responsible for your future, and you need to grab the reins and get into the thick of it.

For example, if you pursue a traditional contract, take a hand in negotiations. Learn what contract terms mean. Negotiate a way to produce non-competing works on your own dime. Don’t just blindly hand the reins of your very life and career to somebody else. Ever again.

Have courage. There is a lot of bumping going on in the turns. Don’t be timid. Bump back. Hang tough in the saddle. If somebody tries to hit you with his riding crop, take it from him.

While the overall effect may be greater challenges vis-à-vis “discoverability,” so what? Facing and overcoming obstacles has always been the lot of the writer. Nothing’s different now. You must produce quality, and a lot of it, for the rest of your life to have a writing career. You must add a long tail to your horse. If you do, you have a chance to cross the finish line and get pelted with flowers.

And why, as a writer, wouldn’t you do this anyway? We write. Even if some of the big publishers fall off their horses, we writers will still be in the race. Even if bookstore shelf space continues to dry up, we writers will still be coming at you.

Because we are creating stories, which is what people want and need in this crazy world. We are weaving dreams, getting under your skin, keeping you up at night, making you laugh and cry and maybe sometimes throw our books across the room.

As the E-book insurrection continues apace, things change on the landscape (some would call it a “battlefield”) almost weekly. Today your intrepid reporter issues a few notes and predictions which I am typing inside a tent somewhere in the literary DMZ:

– Physical shelf space continues a precipitous decline. Print sales are down 25% this year, so bookstores are folding or increasing their stationery footprint at the expense of physical books. Book buyers increasingly browse and buy online, adding to the woes of brick-and-mortar.

– E-Readers are going to explode this Christmas (again). Last year Kindles and Nooks broke the sack on Santa’s back. This year St. Nick will be lugging Kindle Fires all over the universe.

– E-fiction (what Mike Shatzkin calls “narrative text”) is already 25% of the total market. Look for it to be close to 50% by the end of next year. Shatzkin thinks it’ll be 80% within five years.

– This puts increasing stress on the Traditional Publishing Industry (TPI) because print is what made it and sustains it. TPI is doing what it has to do to survive, which comes down to keeping and making happy their A-list authors, and reducing overhead and advances (which of course means less money to invest in new and midlist authors).

– Agents are feeling the pinch, too, since their bread has been buttered by advances. That’s why many of them are transitioning into e-publishing hubs for their clients. The dollars and sense [sic] of this is still being worked out. An agent might broker a deal with a digital house like Open Road in a somewhat traditional manner. Others might offer actual e-publishing services, which raises conflict-of-interest and competency issues. Literary agent Jason Allen Ashlock argues that, “workflow restraints, small staffs, capital concerns, and the modest revenues generated by most digital properties will prevent most Agent-Publishers from adequately managing and effectively publishing more than a few titles.”

– Authors who are succeeding at being completely independent are those who are able to bring entrepreneurial analytics to the task. If you’re going to publish successfully as an indie, you have to think like a business. You have to think about genres and branding and marketing and design and all the aspects of bringing a book to the world. Authors like Bob Mayer, who are trained in strategic thinking, have an advantage. Business skills can be learned but it takes time. For that reason authors may decide to partner with a digital publishing entity. There are way too many variables to discuss here (percentages, length of time for rights, what marketing advantage is offered, and so on). Suffice to say you’ll need to be just as sharp about the details (where the devil is said to hang out) when signing away any digital rights.

– New and frustrated authors are attracted by the nice royalties they can earn by going indie, but you still have to move units to make dough. And to do that, you have to get noticed in the ever-increasing content tsunami. The two bottom line requirements are: consistent production of quality books coupled with creative marketing efforts. Those who are able to deliver the goods at a brisk pace, and are savvy about promotion, have the best chance to reap rewards over time.

– The greatest benefit of indie publishing is speed. It’s hard to wait 12 – 18 months for a physical book to appear. Over the course of a year, from March to March, I will have eight new books out. Three of them traditionally published (one of these is non-fiction), five of them indie originals (and I’m not counting the 7 backlist books I have all the rights to and will bring out next year). I love this! Why the heck not? I love to write and my e-book income in the first 6 months surpassed my latest traditional advance. I say it is okay for writers to make money doing what they love. Radical, I know, but there it is.

– I like TPI. I wrote a nice open letter to that effect. But we all know there is a vicious business spiral going on. Imagine you’re the Ty-D-Bol man and a giant has just flushed the toilet. TPI is in that little boat, hanging on for dear life. Conference rooms all over Manhattan must feel like they’re swirling.

– BTW, did you know Robert Ludlum did voiceovers for those Ty-D-Bol commercials?

For writers considering the indie trail, the times are both challenging and refreshing. But you have to be realistic. The metaphor that e-book publishing is a “gold rush” is no longer apt. There were some early strikes for the bold (e.g., Joe Konrath, Amanda Hocking) but now things are reaching a market equilibrium. That means: an indie writing career is a marathon, not a sprint. You have to train (learn to write), get plenty of nutrition (critical feedback) and then run a smart race (strategize with business thinking, pick your spots, make your moves).

And while huge success is not guaranteed, the nice thing is the race is now open to anyone who loves to run.

So what is your current thinking on this ever-changing landscape? What do you think the future holds, say, a year from now?

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NOTE: I want to amend a response I made earlier this week to Paula Millhouse, who asked about the advisability of putting a book online before getting a deal. I said Nay. David DeLee respectfully dissented. So I asked my agent about this, and he said it was true a couple of years ago, but things have changed. Publishing online will not kill a potential deal if the book performs. No guarantees either, of course, but that’s always been true in the writing game. Thanks to David for the prompt.

There’s an old joke about a guy who goes to see his surgeon. The surgeon has bad news: they’re going to have to operate. The guy says he can’t afford the operation. So the surgeon says, “No problem. For a hundred bucks I’ll touch up the x-rays.”

Right now a lot of people think touching up the x-rays is the way to save traditional publishing. They know that major surgery is required but have no idea where to cut, what to look for, or how to make it better.

It’s really no one’s fault. Stuff happens. In this case, the stuff is e-publishing/reading, and it has exploded faster than most thought possible. And big industry is not built to change on a dime. It’s not even built to change on an open road, especially when there are all sorts of trails and byways it has never explored, or even been equipped to explore.

Meanwhile, a bad business spiral only increases in speed.

Bookstores are closing. Revenues for print books are way down. That means fewer books published on paper. Even those that are P-published have fewer places to go. They sure ain’t going to Borders.

The trend line for print is not good. According to the American Association of Publishers, in January of this year hardcover sales were down 11.3% and mass market paperbacks down 30.9%.

Further, the old way people used to find books –- browsing and being hand-sold by trusted folks in physical bookstores — is over. Gone. Finito.

Forever.

The big publishers didn’t want that to happen.

But it has.

And we have to acknowledge the reality and not get out the Sharpies to cover spots on the x-ray film. (see also, “Sand, Ostrich Head In”)

I take no pleasure in the big publishers’ pain. It is a matter of professional pride to me to not allow my preferences to color my predictions. I love bookstores and libraries and consider the top management of the big trade houses to be intelligent, ethical, and creative people. I consider many of them friends. The fact that the transition from reading and distributing print to largely reading on screens and distributing print online makes much of their skill sets and business models obsolete is not their fault. Nor is the fact that preserving their old business, and the cash flow it still yields, sometimes interferes with inventing the new one.

The next 4 – 6 months are critical for the survival of traditional publishing in some form. It will not look like it does now. And it will never again be “the only game in town.”

Meanwhile, writers write. We know there is money to be made in self-publishing e-books. I’m experiencing that now with WATCH YOUR BACK.

This pleases me, because it is the most elemental of transactions, just like when Og the caveman got a year’s worth of fox furs from the tribal chieftain for telling stories about heroic fights with the killer mastodons. We can go directly to readers, who can download us directly to their devices.

There are many, many things traditional publishers do well, and have for a long time. But that is a bit beside the point. Typewriters did many things well, too.

Here’s the $64 billion question: Which traditional publishers will turn out to be like Apple and which like Underwood? What will the new industry standard look like?

The Liternet was abuzz this week with the news that a New York Times bestselling author, Barry Eisler, turned down half a million bones from a traditional publisher to go E.

Some are calling this a “key benchmark.” Others, a “tipping point.” Whatever you call it, it’s a pretty big deal. Eisler giving self-pub his sanction will increase the number of name authors making the same move. It’s happening even as we read.

Meanwhile, self-publishing millionaire Amanda Hocking has just signed a traditional deal for more than $2 million. Ms. Hocking, 26, explains her decision here. She’s not giving up self-publishing, which is itself news—she has given herself the clout to get a traditional publisher to go along with a tandem track. What’s funny is that she is the one who calls having her books traditionally published a risk—for her.

Interesting times, eh? It used to be publishers were the ones who talked about risk. Where is Lewis Carroll when you need him?

Both Alice and the Mad Hatter would agree, I think, that it’s a good times for writers. As I have put a toe in the water myself, a few thoughts are in order over several current “debates.”

The Rapid Rise v. The Tailing Off Debate

Digital publishing is moving faster than most expected a year ago, and that makes this a good move for Eisler. He can have more books come out at a faster clip. He’s in a position to rake in the kind of dough Joe Konrath is (reportedly that same half a mil per year).

Can this growth be sustained? I think so. It will reach such a scale that any “tailing off” will be insignificant.

As a news junkie, it’s been fascinating for me to watch the way the publishing establishment has tried to marginalize you. First by ignoring you, and then, when ignoring you become impossible, by trying to position you as some sort of shrill, bitter, fringe player with nothing more than an axe to grind. The way legacy publishing has tried to de-position you is perfectly analogous to what The New York Times and other establishment media players have tried to do with Wikileaks.

I’m not sure one can generalize about the entire “publishing establishment” being intentional about marginalizing Joe Konrath (Eisler, of course, is ex-CIA, so he may have some intel we don’t know about).

Anyway, this is less about “who’s right” than it is about objective facts and business models. The traditional model is reeling right now. They’re like Jake LaMotta in his sixth bout with Sugar Ray Robinson. And it’s not because “they” are mean and nasty. They simply are not an exception to the inexorable laws of innovation and economics. They have to adjust, but it is extremely difficult for major industries to change course, and especially to do it quickly in response to the sudden reshaping of market forces.

I love traditional publishing. Publishers have been, and are, very good to me and I have many friends in the industry. I’ve also seen friends lose their jobs. I hate that, but I also understand the business angle. Businesses have to do what they must to do to survive. So do authors.

Which is why I see no reason an author might not self-publish and work with a traditional publisher in some form or fashion (this will require two oft ignored business principles, creativity and flexibility).

My novella and short story collection, Watch Your Back, probably would not have seen publication in print. So it went live as an e-book in February, and sold well enough to show me it was worth it.

But for this month to date, March, sales are ten times what they were in February.

To which I say, WHAT?

I’m not sure how this happened. It could be the result of a well placed blog interview, or some cumulative effect of Amazon’s recommend-algorithm (you know, “If you liked this, you may like this”). Or it could be some alchemy no one can reconstruct or replicate. The one thing it does prove is the tremendous potential of E.

And here’s another thing: I am making new readers daily. Isn’t that what publishers and agents are pushing authors to do? Build a platform? This is nothing but positive for an author and a traditional publisher, should they team up down the line. Which brings us to:

The Platform v. Random Acts of Discovery Argument

Konrath has made a good case, backed up by examples, of those who did not have a platform or readership before self-publishing. There are some who have blasted off, others who are doing quite well. (The majority do very little, but this has always been true).

An established base certainly doesn’t hurt, but zero name recognition can be overcome with quality writing, consistent output and marketing energy. Which leads to:

The Quality vs. Persistence Argument

Is it possible for someone to just keep pumping out dreck and make some good coin? Depends on your definition of “good.” A hundred bucks a year may be okay for someone. But if you want to make substantial lettuce, I say you have to produce really good books. So it’s better to wait than to rush in with a lot of bad stuff. That will only hurt your long term results.

The Extinction of Traditional Publishing v. A New Model Argument

Is traditional publishing dead and just doesn’t know it (as some writers, with a bit too much glee, assert)? Or will it find its way to some new equilibrium? Even the ever prescient Mike Shatzkin isn’t sure:

If the legacy publishing establishment can develop tools to deliver marketing at scale, adjust its contracts to pay higher digital royalties, and, perhaps, offer a “fee for service” model alongside its “advance against royalty” model, it might, like Major League Baseball did, weaken the infrastructure that is developing that will increasingly tempt authors (and readers) to abandon it. But it also could be that U was right four years ago when I said that the general trade publishing house was a dinosaur in the emerging world of 21st century publishing. Wasn’t it a natural disaster that was the catalyst for killing the original dinosaurs as well?

Whatever the future brings, it’s still going to be all about the writing. The one thing publishing can’t do without is writers. The one thing readers can’t do without is writers. I’ve worked hard at this craft for over 20 years. I love it. It’s what I do. And I believe any way to make a fair exchange with readers is worthy. E-pubbing provides another way to make that exchange.

So does the Eisler Sanction feel like a “tipping point”? What do you think it means industry wide? What does it mean to you?